Required reading for today is this excellent post by Megan McArdle on the financial crisis. As they say, read the whole thing.
I find it extraordinarily easy to sympathize with the bankers who genuinely believed that they had gotten better at pricing credit risk. I also find it extraordinarily easy to sympathize with people who dropped out of college to start a band. In neither case, however, do I wish to reward this behavior with large stacks of unearned money.
The Dodd plan has better oversight, but no better outline for how this money is to be spent, which is the core problem with the Paulson plan. This morning I listened to Pete Domenici, who is on both the budget and appropriations committees, explain to his colleagues, in tones of wonder, that Ben Bernanke had done his academic work on the Great Depression. These are the people who were in charge of approving Bernanke’s appointment to the Federal Reserve chair, mind you, a task to which they seemingly gave less attention than they do to applying their television makeup.
At that, he’s a massive improvement over the Democrats; as I write this I am enjoying the site of Byron Dorgan simultaneously illustrating that he knows nothing about financial history, and also lecturing us on how we should regulate the industry. At least the other things Pete Domenici said were factually accurate and logically coherent, even if that logic cohered around a not-very-well-thought-out endorsement of the Paulson plan.
This does not exactly fill me with soaring confidence in Congress’s ability to allocate the money. I’d rather trust Paulson.
Half of the Republicans seem to have turned over their consciences to Hank Paulson in the name of party solidarity. Meanwhile, many Democrats seem to be more interested in discussing Wall Street bonuses and struggling homeowners than what to, y’know, do about the banking system.